Common use of PARTICIPATION AFTER DISCOVERY Clause in Contracts

PARTICIPATION AFTER DISCOVERY. Upon completion of a well capable of producing unitized substances in paying quantities, or as soon thereafter as required by the AO, the Land Commissioner, or the Division, the Unit Operator shall submit for approval by the AO, the Land Commissioner, the and Division, a schedule, based on subdivisions of the public-land survey or aliquot parts thereof, of all land then regarded as reasonably proved to be productive of unitized substances in paying quantities. These lands shall constitute a participating area on approval of the AO, the Land Commissioner and Division, effective as of the date of completion of such well or the effective date of this unit agreement, whichever is later. The acreages of both Federal and non-Federal lands shall be based upon appropriate computations from the courses and distances shown on the last approved public-land survey as of the effective date of each initial participating area. The schedule shall also set forth the percentage of unitized substances to be allocated, as provided in Section 12 to each committed tract in the participating area so established, and shall govern the allocation of production commencing with the effective date of the participating area. A different participating area shall be established for each separate pool or deposit of unitized substances or for any group thereof which is produced as a single pool or zone, and any two or more participating areas so established may be combined into one, on approval of the AO, the Land Commissioner and the Division. When production from two or more participating areas is subsequently found to be from a common pool or deposit, the participating areas shall be combined into one, effective as of such appropriate date as may be approved or prescribed by the AO, the Land Commissioner and Division. The participating area or areas so established shall be revised from time to time, subject to the approval of the AO, the Land Commissioner, and Division to include additional lands then regarded as reasonably proved to be productive of unitized substances in paying quantities or which are necessary for unit operations, or to exclude lands then regarded as reasonably proved not to be productive of unitized substances in paying quantities, and the schedule of allocation percentages shall be revised accordingly. The effective date of any revision shall be the first of the month in which the knowledge or information is obtained on which such revision is predicated; provided, however, that a more appropriate effective date may be used if justified by the Unit Operator and approved by the AO, the Land Commissioner and Division. No land shall be excluded from a participating area on account of depletion of its unitized substances, except that any participation area established under the provisions of this unit agreement shall terminate automatically whenever all completions in the formation on which the participating areas is based are abandoned. It is the intent of this section that a participating area shall represent the area productive of unitized substances known or reasonably proved to be productive in paying quantities or which are necessary for unit operations; but, regardless of any revision of the participating area, nothing herein contained shall be construed as requiring any retroactive adjustment for production obtained prior to the effective date of the revision of the participating area. In the absence of agreement at any time between the Unit Operator and the AO, the Land Commissioner, and Division, as to the proper definition or redefinition of a participating area, or until a participating area has, or areas have, been established, the portion of all payments affected thereby shall, except royalty due the United States and the State of New Mexico, be impounded in a manner mutually acceptable to the owners of committed working interests and the AO and the Land Commissioner. Royalties due to the United States and the State of New Mexico shall be determined by the AO for Federal lands and the Land Commissioner for the State lands and the amount thereof shall be deposited, as directed by the AO and the Land Commissioner until a participating area is finally approved and then adjusted in accordance with a determination of the sum due as Federal royalty on the basis of such approved participating area. Whenever it is determined, subject to the approval of the AO, the Land Commissioner, and the Division, that a well drilled under this agreement is not capable of production of unitized substances in paying quantities and inclusion in a participating area of the land of which it is situated in a participating area is unwarranted, production from such well shall, for the purposes of settlement among all parties other than working interest owners, be allocated to the land on which the well is located, unless such land is already within the participating area established for the pool or deposit from which such production is obtained. Settlement for working interest benefits from such a nonpaying unit well shall be made as provided in the unit operating agreement.

PARTICIPATION AFTER DISCOVERY. Upon completion of a well capable of producing pro- ducing unitized substances in paying quantitiesquan- tities, or as soon thereafter as required by 43 CFR Ch. II (10–1–11 Edition) the AO, the Land Commissioner, or the Division, the Unit Operator shall submit for approval by the AO, the Land Commissioner, the and Division, a schedule, based on subdivisions of the public-land survey or aliquot ali- quot parts thereof, of all land then regarded as reasonably proved to be productive of unitized substances in paying quantities. These lands shall constitute a participating area on approval of the AO, the Land Commissioner and Division, effective as of the date of completion of such well or the effective ef- fective date of this unit agreement, whichever which- ever is later. The acreages of both Federal and non-Federal lands shall be based upon appropriate computations from the courses and distances shown on the last approved public-land survey as of the effective date of each initial participating area. The schedule shall also set forth the percentage of unitized unit- ized substances to be allocated, as provided in Section 12 12, to each committed tract in the participating area so established, and shall govern the allocation of production commencing com- mencing with the effective date of the participating par- ticipating area. A different participating area shall be established for each separate pool or deposit of unitized substances or for any group thereof which is produced as a single sin- gle pool or zone, and any two or more participating par- ticipating areas so established may be combined com- bined into one, on approval of the AO, the Land Commissioner and the Division. When production from two or more participating areas is subsequently found to be from a common pool or deposit, the participating areas shall be combined into one, effective as of such appropriate date as may be approved or prescribed by the AO, the Land Commissioner and Division. The participating area or areas so established shall be revised from time to time, subject to the approval of the AO, the Land Commissioner, and Division to include additional lands then regarded re- garded as reasonably proved to be productive of unitized substances in paying quantities or which are necessary for unit operations, or to exclude lands then regarded as reasonably reason- ably proved not to be productive of unitized substances in paying quantities, and the schedule of allocation percentages shall be revised accordingly. The effective date of any revision shall be the first of the month in which the knowledge or information is obtained ob- tained on which such revision is predicated; provided, however, that a more appropriate effective date may be used if justified by the Unit Operator and approved by the AO, the Land Commissioner and Division. No land shall be excluded from a participating area on account of depletion of its unitized substances, except that any participation participating area established under the provisions of this unit agreement shall terminate automatically automati- cally whenever all completions in the formation forma- tion on which the participating areas area is based are abandoned. It is the intent of this section that a participating par- ticipating area shall represent the area productive of unitized substances known or reasonably proved to be productive of unitized substances in paying quantities or which are necessary for unit operations; but, regardless of any revision of the participating partici- pating area, nothing herein contained shall Bureau of Land Management, Interior § 3186.1 be construed as requiring any retroactive adjustment ad- justment for production obtained prior to the effective date of the revision of the participating par- ticipating area. In the absence of agreement at any time between the Unit Operator and the AO, the Land Commissioner, and Division, AO as to the proper definition or redefinition of a participating par- ticipating area, or until a participating area has, or areas have, been established, the portion por- tion of all payments affected thereby shall, except royalty due the United States and the State of New MexicoStates, be impounded im- pounded in a manner mutually acceptable to the owners of committed working interests and the AO and the Land Commissionerinterests. Royalties due to the United States and the State of New Mexico shall be determined de- termined by the AO for Federal lands and the Land Commissioner for the State lands and the amount thereof shall be deposited, as directed by the AO and the Land Commissioner AO, until a participating area is finally approved and then adjusted in accordance with a determination de- termination of the sum due as Federal royalty xxx- xxxx on the basis of such approved participating partici- pating area. Whenever it is determined, subject to the approval of the AO, the Land Commissioner, and the Division, that a well drilled under this agreement is not capable of production of unitized substances in paying quantities and inclusion in a participating area of the land of on which it is situated in a participating area is unwarranted, production from such well shall, for the purposes pur- poses of settlement among all parties other than working interest owners, be allocated to the land on which the well is located, unless un- less such land is already within the participating partici- pating area established for the pool or deposit de- posit from which such production is obtainedob- tained. Settlement for working interest benefits ben- efits from such a nonpaying unit well shall be made as provided in the unit operating agreement.

PARTICIPATION AFTER DISCOVERY. Upon For the purposes of this Unit Agreement, the Productivity Requirement, for purposes of establishing the unit as a productive unit and/or the establishment of a participating area within the unit, shall be met when either one well is completed as capable of producing Unitized Substances in quantities of 75,000 cubic feet of gas per day (75 MCFGPD) or multiple xxxxx are completed capable of producing, in the aggregate, Unitized Substances in quantities of 300,000 cubic feet of gas per day (300 MCFGPD), for a period of fifteen (15) continuous days or more, (“Productivity Requirement”). In order to meet the Productivity Requirement hereunder in the case of multiple xxxxx, such multiple xxxxx must be located in proximity to each other so that no more than 2,500 feet of distance exists between the location of one well capable of producing Unitized Substances and the location of another well capable of either: (a) producing Unitized Substances or (b) de-watering for purposes of permitting or enhancing the production of Unitized Substances from another well. Within ninety (90) days after completion of a well or xxxxx capable of producing unitized substances Unitized Substances in paying quantitiesquantities sufficient to meet the Productivity Requirement, or as soon thereafter as required by the AO, the Land Commissioner, or the Divisionset forth hereinabove, the Unit Operator shall submit for approval by the AO, the Land Commissioner, the and Division, a schedule, based on subdivisions of the public-land survey or aliquot parts thereof, of all land then regarded as reasonably proved to be productive of unitized substances Unitized Substances in paying quantitiesquantities sufficient to meet the Productivity Requirement or which are necessary for unit operations. The schedule submitted to the AO by Unit Operator for the initial participating area shall include all xxxxx producing or necessary for the production of Unitized Substances in quantities necessary to meet the Productivity Requirement, including de-watering xxxxx. The lands to be included in the schedule as regarded as reasonably proved to be productive for the initial participating area shall be each 40-acre subdivision, or aliquot equivalent, any portion of which is cut by a circle with a one-quarter mile (1,320 feet) radius drawn around the location of any well completed as a well capable of producing Unitized Substances or completed as a de-watering well necessary for the production of Unitized Substances from such participating area. These lands shall constitute a an initial participating area on approval of the AO, the Land Commissioner and Division, effective as of the date of completion of first sales from such well or xxxxx. Following the effective date establishment of this unit agreementthe initial participating area, whichever is latereach subsequent participating area shall be established using the same Productivity Requirements and by like method. The acreages acreage of both Federal and non-Federal lands shall be based upon appropriate computations from the courses and distances shown on the last approved public-land survey as of the effective date of each initial participating area. The schedule shall also set forth the percentage of unitized substances Unitized Substances to be allocated, as provided in Section 12 11, to each committed tract in the participating area so established, and shall govern the allocation of production commencing with the effective date of the initial participating area. A different An initial participating area shall be established for each separate pool or deposit producing area that is capable of unitized substances producing Unitized Substances or for any group thereof which is produced as a single pool or zoneseparate producing area, and any two or more participating areas so established within the same Sub-Area may be combined into one, on approval of the AO, the Land Commissioner and the Division. When production from two or more participating areas is subsequently found to be from within the same Sub-Area share a common pool or depositboundary, the participating areas shall be combined into one, effective as of such appropriate date as may be approved or prescribed by the AO, the Land Commissioner and Division. The participating area or areas so established shall be revised from time to time, subject to the approval of the AO, the Land Commissioner, and Division to include additional lands then regarded as reasonably proved to be productive of unitized substances in paying quantities Unitized Substances or which are necessary for unit operations, or to exclude lands then regarded as reasonably proved not to be productive of unitized substances in paying quantitiesUnitized Substances, and the schedule of allocation percentages shall be revised accordingly; provided, however, that no participating area established or revised under this Section 10 shall extend beyond the boundaries of Sub-Area on which the earliest well drilled in the participating area was located, thereby limiting the size and configuration of any participating area to the size and configuration of the applicable Sub-Area. Revision of a participating area boundary shall be requested when either: (a) one or more additional xxxxx are completed inside of the participating area, and less than 1320 feet from the boundary of such participating area; or (b) one or more additional xxxxx are completed outside the boundaries of the participating area, but one or more such xxxxx are within 2,500 feet of the boundary of the participating area (including any revision of such boundaries that will result from other xxxxx included in the same revision) or within 2,500 feet of any other well to be included in the revised participating area. Revision of the participating area shall be accomplished by the submission of an application for revision of the participating area (“Application for Revision”) by Unit Operator to the AO, and the subsequent approval of the Application for Revision by the AO. An Application for Revision of a participating area may be submitted for approval to the AO by the Unit Operator on a monthly basis, if additional xxxxx qualifying for a participating area revision are completed during the previous month. Any well(s) or lands included in such Application for Revision need not meet any productivity requirement for inclusion in the participating area other than the requirement that such well(s) be completed as capable of producing Unitized Substances or as a dewatering well. The lands to be included in an Application For Revision shall be each 40-acre subdivision, or aliquot equivalent, any portion of which is cut by a circle with a one-quarter mile (1,320 feet) radius drawn around the location of the well entitled to be included in the Application for Revision. The effective date of any revision shall be the first day of the month in which the knowledge or information is obtained on which such revision is predicatedpredicated (i.e., the date on which the applicable well or xxxxx reached “total depth”); provided, however, that a more appropriate effective date may be used if justified by the Unit Operator and approved by the AO, the Land Commissioner and Division. No land shall be excluded from a participating area on account of depletion of its unitized substancesUnitized Substances, except that any participation participating area established under the provisions of this unit agreement Unit Agreement shall terminate automatically whenever all completions xxxxx completed in the formation on which the participating areas area is based have been abandoned. It is the intent herein that the unit xxxxx drilled hereunder will be drilled on a pattern of not less than one well per 80 acres, or the aliquot equivalent. The parties hereto and the AO recognize, however, that efficient development of the Unit Area or a portion thereof may be accomplished by drilling xxxxx located on a pattern of one well per 160 acres. In the event Operator determines that it can efficiently develop the Unit Area or a portion thereof on a pattern of one well per 160 acres, it shall notify the AO of such event. Thereafter, for purposes of meeting the Productivity Requirement where there are abandonedmultiple xxxxx within a participating area, the distance between xxxxx shall be no more than 5,000 feet, rather than 2,500 feet, and the radius of the circle used to determine the lands to be included within a participating area shall be 2,000 feet drawn around the location of any well, rather than one-quarter mile. The Unit Operator may request a revision of participating area boundaries when either: (a) one or more additional xxxxx are completed inside of the participating area and less than 2,000 feet, rather than 1,320 feet, from the boundaries of such participating area (including any revision of such boundaries that will result from other xxxxx included in the same revision); or (b) one or more additional xxxxx are completed outside the boundaries of the participating area boundaries but within 5,000 feet, rather than 2,500 feet, of the boundary of the participating area, or within 5,000 feet, rather than 2,500 feet, of any other well to be included in the revised participating area. All other terms and requirements of the foregoing paragraph shall remain the same. It is the intent of this section that a participating area shall represent the area productive of unitized substances known or reasonably proved to be productive in paying quantities of Unitized Substances or which are necessary for unit operations; but, regardless of any revision of the participating area, nothing herein contained shall be construed as requiring any retroactive adjustment for production obtained prior to the effective date of the revision of the participating area. In the absence of an agreement at any time between the Unit Operator and the AO, the Land Commissioner, and Division, AO as to the proper definition or redefinition of a participating area, or until a participating area has, or areas have, has been established, the portion of all payments affected thereby shall, except royalty due the United States and the State of New MexicoWyoming, be impounded in a manner mutually acceptable to the owners of committed working interests and the AO and the Land Commissionerinterest owners. Royalties due to the United States and or the State of New Mexico Wyoming shall be determined by the AO for Federal lands and the Land Commissioner for the State lands and the amount thereof shall be deposited, as directed by the AO and the Land Commissioner appropriate Federal or State agency, until a participating area is finally approved and then subsequently adjusted in accordance with a determination of the sum due as Federal or State of Wyoming royalty on the basis of such approved participating area. Whenever it is determinedUpon termination of the Sun Dog Unit and the Xxxx Mountain Unit as provided for in Section 33 hereof, the existing participating area in each such unit shall be merged into this Unit intact, and then be subject to this Unit Agreement the approval of the AO, the Land Commissioner, and the Division, that a well drilled same as if such participating areas had been originally established under this agreement is not capable Unit Agreement. Determination as to whether xxxxx completed within the Unit Area prior to the effective date of production of unitized substances in paying quantities and this Unit Agreement are qualified for inclusion in a participating area shall be deferred until an initial participating area is established as the result of the land completion of which it is situated in a well or xxxxx qualifying for establishment of a participating area is unwarranted, production from such well shall, for the purposes in accordance with Section 10 of settlement among all parties other than working interest owners, be allocated to the land on which the well is located, unless such land is already within the participating area established for the pool or deposit from which such production is obtained. Settlement for working interest benefits from such a nonpaying unit well shall be made as provided in the unit operating agreementthis Unit Agreement.

PARTICIPATION AFTER DISCOVERY. Upon completion of a well capable of producing pro- ducing unitized substances in paying quantitiesquan- tities, or as soon thereafter as required by 43 CFR Ch. II (10–1–13 Edition) the AO, the Land Commissioner, or the Division, the Unit Operator shall submit for approval by the AO, the Land Commissioner, the and Division, a schedule, based on subdivisions of the public-land survey or aliquot ali- quot parts thereof, of all land then regarded as reasonably proved to be productive of unitized substances in paying quantities. These lands shall constitute a participating area on approval of the AO, the Land Commissioner and Division, effective as of the date of completion of such well or the effective ef- fective date of this unit agreement, whichever which- ever is later. The acreages of both Federal and non-Federal lands shall be based upon appropriate computations from the courses and distances shown on the last approved public-land survey as of the effective date of each initial participating area. The schedule shall also set forth the percentage of unitized unit- ized substances to be allocated, as provided in Section 12 12, to each committed tract in the participating area so established, and shall govern the allocation of production commencing com- mencing with the effective date of the participating par- ticipating area. A different participating area shall be established for each separate pool or deposit of unitized substances or for any group thereof which is produced as a single sin- gle pool or zone, and any two or more participating par- ticipating areas so established may be combined com- bined into one, on approval of the AO, the Land Commissioner and the Division. When production from two or more participating areas is subsequently found to be from a common pool or deposit, the participating areas shall be combined into one, effective as of such appropriate date as may be approved or prescribed by the AO, the Land Commissioner and Division. The participating area or areas so established shall be revised from time to time, subject to the approval of the AO, the Land Commissioner, and Division to include additional lands then regarded re- garded as reasonably proved to be productive of unitized substances in paying quantities or which are necessary for unit operations, or to exclude lands then regarded as reasonably reason- ably proved not to be productive of unitized substances in paying quantities, and the schedule of allocation percentages shall be revised accordingly. The effective date of any revision shall be the first of the month in which the knowledge or information is obtained ob- tained on which such revision is predicated; provided, however, that a more appropriate effective date may be used if justified by the Unit Operator and approved by the AO, the Land Commissioner and Division. No land shall be excluded from a participating area on account of depletion of its unitized substances, except that any participation participating area established under the provisions of this unit agreement shall terminate automatically automati- cally whenever all completions in the formation forma- tion on which the participating areas area is based are abandoned. It is the intent of this section that a participating par- ticipating area shall represent the area productive of unitized substances known or reasonably proved to be productive of unitized substances in paying quantities or which are necessary for unit operations; but, regardless of any revision of the participating partici- pating area, nothing herein contained shall Bureau of Land Management, Interior § 3186.1 be construed as requiring any retroactive adjustment ad- justment for production obtained prior to the effective date of the revision of the participating par- ticipating area. In the absence of agreement at any time between the Unit Operator and the AO, the Land Commissioner, and Division, AO as to the proper definition or redefinition of a participating par- ticipating area, or until a participating area has, or areas have, been established, the portion por- tion of all payments affected thereby shall, except royalty due the United States and the State of New MexicoStates, be impounded im- pounded in a manner mutually acceptable to the owners of committed working interests and the AO and the Land Commissionerinterests. Royalties due to the United States and the State of New Mexico shall be determined de- termined by the AO for Federal lands and the Land Commissioner for the State lands and the amount thereof shall be deposited, as directed by the AO and the Land Commissioner AO, until a participating area is finally approved and then adjusted in accordance with a determination de- termination of the sum due as Federal royalty xxx- xxxx on the basis of such approved participating partici- pating area. Whenever it is determined, subject to the approval of the AO, the Land Commissioner, and the Division, that a well drilled under this agreement is not capable of production of unitized substances in paying quantities and inclusion in a participating area of the land of on which it is situated in a participating area is unwarranted, production from such well shall, for the purposes pur- poses of settlement among all parties other than working interest owners, be allocated to the land on which the well is located, unless un- less such land is already within the participating partici- pating area established for the pool or deposit de- posit from which such production is obtainedob- tained. Settlement for working interest benefits ben- efits from such a nonpaying unit well shall be made as provided in the unit operating agreement.

PARTICIPATION AFTER DISCOVERY. Upon completion of the first well to be completed as a well capable of producing unitized substances in paying quantities, or as soon thereafter as required by the AO, file AO and the Land Commissioner, or the Division, the Unit Operator shall submit for approval by the AO, AO and the Land Commissioner, the and Division, a schedule, based on subdivisions of the public-land survey or aliquot parts thereof, of all land then regarded as reasonably proved to be productive of unitized substances in paying quantitiesthe Unit Area. These lands The Unit Area shall constitute a participating area on approval of the AO, the AO and Land Commissioner and DivisionCommissioner, effective as of the date of completion of such well or the effective date of this unit agreement, whichever is later. The acreages of both Federal and non-Federal Fcderal lands shall be based upon appropriate computations from the courses and distances shown on the last approved public-land survey as of the effective date of each initial the participating area. The schedule shall also set forth the percentage of unitized substances to be allocated, as provided in Section 12 12, to each committed tract in the participating area so established, and shall govern the allocation of production commencing with the effective date of the participating area. A different participating area shall be established for each separate pool or deposit of unitized substances or for any group thereof which is produced as a single pool or zone, and any two or more participating areas so established may be combined into one, on approval of the AO, the Land Commissioner and the Division. When production from two or more participating areas is subsequently found to be from a common pool or deposit, the participating areas shall be combined into one, effective as of such appropriate date as may be approved or prescribed by the AO, the Land Commissioner and Division. The participating area or areas so established shall be revised from time to timetime as provided in Section 2, subject to the approval of the AO, AO and the Land Commissioner, and Division to include additional lands then regarded as reasonably proved to be productive of unitized substances in paying quantities or which are necessary for unit operations, or to exclude lands then regarded as not reasonably proved not to be productive of unitized substances in paying quantities, and the schedule of allocation percentages shall be revised accordingly. The effective date of any revision shall be the first of the month in which the knowledge or information is obtained on which such revision is predicated; provided, however, that a more appropriate effective date may be used if justified ifjustified by the Unit Operator and approved by the AO, AO and the Land Commissioner and DivisionCommissioner. No land shall be excluded from a participating area on account of depletion depiction of its unitized substances, except that any participation participating area established under the provisions of this unit agreement shall terminate tenninatc automatically whenever all completions in the formation on which the participating areas area is based are abandoned. It is the intent of this section that a participating area shall represent the area productive of unitized substances known or reasonably proved to be productive in paying quantities or which are necessary for unit operations; but, regardless Regardless of any revision of the participating area, nothing herein contained shall be construed as requiring any retroactive adjustment for production obtained prior to the effective date of the revision of the participating area. In the absence of agreement at any time lime between the Unit Operator Operator, the AO and the AO, the Land Commissioner, and Division, as to the proper definition or redefinition of a participating area, or until a participating area has, or areas have, has been established, the portion of all payments affected thereby shall, except royalty due the United States and the State of New Mexico, be impounded in a manner mutually acceptable to the owners of committed working interests and the AO and the Land Commissionerinterests. Royalties due to the United States and the State of New Mexico shall be determined by the AO for Federal lands and the Land Commissioner for the State lands Stale Lands and the amount thereof shall be deposited, as directed by the AO and the Land Commissioner Commissioner, until a participating area is finally approved and then adjusted in accordance with a determination of the sum due as Federal or non-Federal royalty on the basis of such approved participating area. Whenever it is determineddetennined, subject to the approval of the AO, AO and the Land Commissioner, and the Division, that a well drilled under this agreement is not capable of production of unitized substances in paying quantities and inclusion in a participating area of the land of on which it is situated in a participating area is unwarranted, production from such well shall, for the purposes of settlement among all parties other than titan working interest owners, be allocated to the land on which the well is located, unless such land is already within the participating area established located by cominunitization agreement or on a lease basis for the pool or deposit from which such production is obtainedindividual well. Settlement for working interest benefits from such a nonpaying unit well shall be made as provided in the unit operating agreement.

PARTICIPATION AFTER DISCOVERY. Upon completion of a well capable of producing pro- ducing unitized substances in paying quantitiesquan- tities, or as soon thereafter as required by 43 CFR Ch. II (10–1–14 Edition) the AO, the Land Commissioner, or the Division, the Unit Operator shall submit for approval by the AO, the Land Commissioner, the and Division, a schedule, based on subdivisions of the public-land survey or aliquot ali- quot parts thereof, of all land then regarded as reasonably proved to be productive of unitized substances in paying quantities. These lands shall constitute a participating area on approval of the AO, the Land Commissioner and Division, effective as of the date of completion of such well or the effective ef- fective date of this unit agreement, whichever which- ever is later. The acreages of both Federal and non-Federal lands shall be based upon appropriate computations from the courses and distances shown on the last approved public-land survey as of the effective date of each initial participating area. The schedule shall also set forth the percentage of unitized unit- ized substances to be allocated, as provided in Section 12 12, to each committed tract in the participating area so established, and shall govern the allocation of production commencing com- mencing with the effective date of the participating par- ticipating area. A different participating area shall be established for each separate pool or deposit of unitized substances or for any group thereof which is produced as a single sin- gle pool or zone, and any two or more participating par- ticipating areas so established may be combined com- bined into one, on approval of the AO, the Land Commissioner and the Division. When production from two or more participating areas is subsequently found to be from a common pool or deposit, the participating areas shall be combined into one, effective as of such appropriate date as may be approved or prescribed by the AO, the Land Commissioner and Division. The participating area or areas so established shall be revised from time to time, subject to the approval of the AO, the Land Commissioner, and Division to include additional lands then regarded re- garded as reasonably proved to be productive of unitized substances in paying quantities or which are necessary for unit operations, or to exclude lands then regarded as reasonably reason- ably proved not to be productive of unitized substances in paying quantities, and the schedule of allocation percentages shall be revised accordingly. The effective date of any revision shall be the first of the month in which the knowledge or information is obtained ob- tained on which such revision is predicated; provided, however, that a more appropriate effective date may be used if justified by the Unit Operator and approved by the AO, the Land Commissioner and Division. No land shall be excluded from a participating area on account of depletion of its unitized substances, except that any participation participating area established under the provisions of this unit agreement shall terminate automatically automati- cally whenever all completions in the formation forma- tion on which the participating areas area is based are abandoned. It is the intent of this section that a participating par- ticipating area shall represent the area productive of unitized substances known or reasonably proved to be productive of unitized substances in paying quantities or which are necessary for unit operations; but, regardless of any revision of the participating partici- pating area, nothing herein contained shall Bureau of Land Management, Interior § 3186.1 be construed as requiring any retroactive adjustment ad- justment for production obtained prior to the effective date of the revision of the participating par- ticipating area. In the absence of agreement at any time between the Unit Operator and the AO, the Land Commissioner, and Division, AO as to the proper definition or redefinition of a participating par- ticipating area, or until a participating area has, or areas have, been established, the portion por- tion of all payments affected thereby shall, except royalty due the United States and the State of New MexicoStates, be impounded im- pounded in a manner mutually acceptable to the owners of committed working interests and the AO and the Land Commissionerinterests. Royalties due to the United States and the State of New Mexico shall be determined de- termined by the AO for Federal lands and the Land Commissioner for the State lands and the amount thereof shall be deposited, as directed by the AO and the Land Commissioner AO, until a participating area is finally approved and then adjusted in accordance with a determination de- termination of the sum due as Federal royalty xxx- xxxx on the basis of such approved participating partici- pating area. Whenever it is determined, subject to the approval of the AO, the Land Commissioner, and the Division, that a well drilled under this agreement is not capable of production of unitized substances in paying quantities and inclusion in a participating area of the land of on which it is situated in a participating area is unwarranted, production from such well shall, for the purposes pur- poses of settlement among all parties other than working interest owners, be allocated to the land on which the well is located, unless un- less such land is already within the participating partici- pating area established for the pool or deposit de- posit from which such production is obtainedob- tained. Settlement for working interest benefits ben- efits from such a nonpaying unit well shall be made as provided in the unit operating agreement.

PARTICIPATION AFTER DISCOVERY. Upon completion of a well capable of producing unitized substances in paying quantities, or as soon thereafter as required by the AO, the Land Commissioner, or the Division, the Unit Operator shall submit for approval by the AO, the Land Commissioner, the and Division, a schedule, based on subdivisions of the public-land survey or aliquot parts thereof, of all land then regarded as reasonably proved to be productive of unitized substances in paying quantities. These lands shall constitute a participating area on approval of the AO, the Land Commissioner and Division, effective as of the date of completion of such well or the effective date of this unit agreement, whichever is later. The acreages of both Federal and non-Federal lands shall be based upon appropriate computations from the courses and distances shown on the last approved public-land survey as of the effective date of each initial participating area. The schedule shall also set forth the percentage of unitized substances to be allocated, as provided in Section 12 12, to each committed tract in the participating area so established, and shall govern the allocation of production commencing with the effective date of the participating area. A different participating area shall be established for each separate pool or deposit of unitized substances or for any group thereof which is produced as a single pool or zone, and any two or more participating areas so established may be combined into one, on approval of the AO, the Land Commissioner and the Division. When production from two or more participating areas is subsequently found to be from a common pool or deposit, the participating areas shall be combined into one, effective as of such appropriate date as may be approved or prescribed by the AO, the Land Commissioner and Division. The participating area or areas so established shall be revised from time to time, subject to the approval of the AO, the Land Commissioner, and Division to include additional lands then regarded as reasonably proved to be productive of unitized substances in paying quantities or which are necessary for unit operations, or to exclude lands then regarded as reasonably proved not to be productive of unitized substances in paying quantities, and the schedule of allocation percentages shall be revised accordingly. The effective date of any revision shall be the first of the month in which the knowledge or information is obtained on which such revision is predicated; provided, however, that a more appropriate effective date may be used if justified by the Unit Operator and approved by the AO, the Land Commissioner and Division. No land shall be excluded from a participating area on account of depletion of its unitized substances, except that any participation participating area established under the provisions of this unit agreement shall terminate automatically whenever all completions in the formation on which the participating areas area is based are abandoned. It is the intent of this section that a participating area shall represent the area productive of unitized substances known or reasonably proved to be productive of unitized substances in paying quantities or which are necessary for unit operations; but, regardless of any revision of the participating area, nothing herein contained shall be construed as requiring any retroactive adjustment for production obtained prior to the effective date of the revision of the participating area. In the absence of agreement at any time between the Unit Operator and the AO, the Land Commissioner, and Division, AO as to the proper definition or redefinition of a participating area, or until a participating area has, or areas have, been established, the portion of all payments affected thereby shall, except royalty due the United States and the State of New MexicoStates, be impounded in a manner mutually acceptable to the owners of committed working interests and the AO and the Land Commissionerinterests. Royalties due to the United States and the State of New Mexico shall be determined by the AO for Federal lands and the Land Commissioner for the State lands and the amount thereof shall be deposited, as directed by the AO and the Land Commissioner AO, until a participating area is finally approved and then adjusted in accordance with a determination of the sum due as Federal royalty on the basis of such approved participating area. Whenever it is determined, subject to the approval of the AO, the Land Commissioner, and the Division, that a well drilled under this agreement is not capable of production of unitized substances in paying quantities and inclusion in a participating area of the land of on which it is situated in a participating area is unwarranted, production from such well shall, for the purposes of settlement among all parties other than working interest owners, be allocated to the land on which the well is located, unless such land is already within the participating area established for the pool or deposit from which such production is obtained. Settlement for working interest benefits from such a nonpaying unit well shall be made as provided in the unit operating agreement. 12.